Analysts see gas prices falling by midweek

Oct. 8, 2012

Updated Aug. 21, 2013 1:17 p.m.

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Early Monday morning the price of gas at O.C. Gas, at the intersection of Santa Clara and Grand Avenue, in Santa Ana, was $4.99 a gallon for regular gas. The price had risen to $5.09 at this station the day before. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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A cyclist beats the high price of gas , passing a GASCO fueling station at the intersection of 17th Street and Broadway, Santa Ana, where the cash price of regular gasoline was $4.58. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Monday morning, one of the cheapest prices for gasoline found in Orange County was at the Libra Gasoline Food Mart at 1131 S. Main Street in Santa Ana. The cash price of regular gas was $4.35. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Monday morning, one of the cheapest prices for gasoline found in Orange County was at the Libra Gasoline Food Mart at 1131 S. Main Street in Santa Ana. The cash price of regular gas was $4.35. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Monday Morning, there were plenty of vacant pumping stations at the ARCO station at the intersection of Main Street and Warner Avenue, Santa Ana, where the price for regular gasoline was $4.89 a gallon. The regular gasoline price had been $5.09 just the day before. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Customers fuel up at the Garden Grove Costco where regular gas was selling for $4.51 Monday morning. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Monday morning, a mid-range price for gasoline was $4.59 a gallon, cash price for regular gas, at the Shell station at the intersection of Chapman Avenue and Euclid Street, Garden Grove. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

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Monday morning, one of the cheapest prices for gasoline found in Orange County was at the Libra Gasoline Food Mart at 1131 S. Main Street in Santa Ana. The cash price of regular gas was $4.35. BRUCE CHAMBERS, THE ORANGE COUNTY REGISTER

The rise of Orange County gas prices appeared to have slowed Monday, and analysts saw welcome signs that prices would begin dropping by the middle of the week.

California pollution regulators took the almost-unprecedented step of allowing a cheaper blend of gasoline onto the market earlier than usual in an effort to cut pump prices. Sen. Dianne Feinstein called for a federal investigation into whether "malicious trading schemes" had helped launch prices skyward. Sen. Barbara Boxer late Monday asked for a probe of refinery maintenance issues.

Meanwhile, drivers here and across California were staring down a third straight day of record-breaking prices. The average gallon of regular unleaded was going for $4.69 in Orange County, AAA said.

One consolation: The price had risen fractions of a penny overnight. Late last week, amid supply shortages, refinery problems and a statewide panic, Orange County prices shot up 19 cents in one 24-hour period.

"If you're not out of the woods, you sure as hell can see the meadow," said Tom Kloza, the chief oil analyst at Oil Price Information Service. He predicted that prices would be down by "nickels and dimes" by the end of the week.

Market analysts said that a drop in pump prices should begin within the next day or two. Wholesale prices have begun to fall as supplies improve, and prices at the pump typically follow shortly afterward. Gregg Laskoski, a senior petroleum analyst with GasBuddy.com, said California drivers should see lower prices by Thursday.

In an effort to further drive down prices, California's pollution-control Air Resources Board approved an immediate switch to winter-blend gasoline. That blend evaporates more quickly and sends more pollutants into the air during warm weather, so the state typically requires a cleaner blend until Oct. 31.

Regulators have allowed such an early statewide changeover only once before, in the wake of Hurricane Katrina in 2005, board spokesman Dave Clegern said. This time, the board was acting on orders from Gov. Jerry Brown, who said the early switch would "provide a much needed safety valve with negligible air quality impacts."

Pump prices would have fallen even without the early changeover, several analysts said. But the air-resources board estimated the switch could increase California's gasoline supply by as much as 8 percent by the end of the month. That would free up about as much gasoline as a fair-size refinery produces.

Analysts said a series of problems at key California oil facilities sent prices soaring, culminating in the record-shattering run of the past week. Fire slowed production at one of the state's biggest refineries in Northern California. A power outage disrupted another big refinery in Torrance. Contamination shut down a major pipeline.

But industry sources told the Reuters news agency last week that market forces alone could not explain the price spike. Traders cited by the news service suggested that refiner Tesoro was caught short on supply. As it scrambled to buy additional fuel, other companies were able to squeeze it, Reuters reported, driving up prices.

On Sunday, Feinstein sent a letter to the chairman of the Federal Trade Commission demanding an investigation and the creation of a special unit to oversee gas and oil markets. "California's consumers are all too familiar with energy price spikes which cannot be explained by market fundamentals, and which turn out years later to have been the result of malicious and manipulative trading activity," she wrote.

Teresa Miles, 59, of Anaheim, fueled up Monday morning at an Arco station in Anaheim, having just dropped her husband at work. With prices so high, she said: "I don't go anywhere unless I absolutely have to.

"We couldn't afford a second car right now if we wanted to," she said. "How can people drive around with these prices?"

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